McHenry keeps Aa2 credit rating

McHENRY – The city of McHenry will keep its credit rating after an analysis by one by the three main ratings agencies.

Moody's Investors Service, a unit of Moody's Corp., reaffirmed the city's Aa2 rating on its $20 million of outstanding debt.

The Aa rating means the city's debt is considered to be of high quality and carries very low credit risk, according to Moody's. The Aa2 classification means it falls in the middle of that field.

"They've been downgrading a lot of cities so it's a good thing that we get to keep our ratings," McHenry Director of Finance Carolyn Lynch.

The analysis that led to the rating weighed the city's strengths – its home-rule status, which gives it flexibility in raising revenue, surpluses that have cushioned its reserves, a modest tax burden and the increased amount the city has been contributing to pensions – with its challenges, in particular substantial declines in property values and the sensitivity of its revenue streams to the economy, according to a Moody's news release.

The city could see its rating move up if the property base stabilized or expand or if reserves increased some other way, the release said, adding that a continued decline in the tax base or a return to deficits that sucked up reserves could lead to a drop in the rating.

The rating is particularly important if the McHenry City Councils decides to move forward on a proposed recreation center.

The project would likely require the city to take out bonds, Lynch said.

"Sometimes when you're downgraded, it's harder to find a purchaser because you look like a higher risk, and the higher the risk, the higher the interest rate," she said.